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giftedviz.com January 19, 2019


Tech industry uncertainty as Samsung slashes profit guidance

09 January 2019, 12:15 | Austin Hogan

Samsung warns of profit drop as chip demand slows

Samsung expects sharp drop in fourth-quarter profit

In brief: Following a rare disappointing second quarter of 2018, Samsung returned to record profits in Q3 a year ago.

South Korea's LG Electronics said on Tuesday (Jan 8) its fourth-quarter operating profit likely plummeted 80 per cent from the same period a year earlier, falling well below analyst expectations.

In Samsung's case, the tech giant estimated its operating profit for the three months ended December was approximately 10.8 trillion Korean won (approximately $9.67 billion), which is roughly 29 percent down year-over-year and about 18 percent less than the 13.2 trillion won predicted by analysts.

For 2018, the South Korean tech giant said it expects operating profit to reach 58.9 trillion won, up almost 10 percent from the previous year, and sales to inch up 1.6 percent to 243.5 trillion won.

Samsung doesn't expect the memory business to pick up much in the next quarter (analysts believe data center customers like Amazon, Microsoft, and Google have enough memory for the time being), but the company hopes for improvements in the second half of the year.

It follows a similar warning from Apple, Samsung's chief rival in the smartphone sector, which triggered mass sell-offs after chief executive Tim Cook said that sales in China had slowed due to its ongoing trade war with the USA. "And China's overall smartphone market is stalled and declining, which will affect not only Apple but Samsung", Song Myung-sup, a senior analyst at HI Investment & Securities, told Reuters.

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Demand for DRAM memory chips "will hit a low in the fourth quarter of 2019", he added.

"Amid a stagnant and fiercely competitive market, mobile profits declined due to increased marketing expenses under strong seasonality and a flat smartphone sales volume", Samsung said.

While Samsung still leads the world in smartphone sales, it's being squeezed by Chinese handset makers like Huawei Technologies Co. The South Korean giant will announce more details later on this month alongside its full Q4 2018 report.

Samsung is also set to introduce the world's first bending smartphone in the first half.

Samsung's reputation suffered a major blow after a damaging worldwide recall of its Galaxy Note 7 devices over exploding batteries in 2016, which cost the firm billions of dollars and shattered its global brand image.



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